After the release of manufacturing data in the euro zone and U.K. earlier this week, today eyes are on services, the largest sector in most European economies, to appraise the performance of the expected growth forecasts in the second quarter.
In the euro zone manufacturing sector's expansion slowed down as it came in at 55.8 in May from 57.6 in April, while German manufacturing inched up to 58.4 in May from 58.3.
PMI services for May final reading is expected to remain at 56.0 and 53.7 in the euro area and Germany respectively. Also, PMI composite for the euro zone is predicted to linger at 56.2.
Following the remarkable improvement in these leading sectors, after contracting during the recession, the pace of progress stared to ease amid the debt woes and rising unemployment in the euro area.
Trichet said previously that recovery will be gradual is estimated to be sluggish this year, where the economy will weigh upon sales overseas to boost growth, taking advantage of the euro's depreciation against the dollar.
EU officials introduced $1 trillion bailout package to highly indebted countries, more specifically Portugal, Spain, and Italy. In addition, Greece announced yesterday that it is planning to sell stakes in public-owned assets to trim the massive sovereign debt that reached 13.6% of GDP last year. As a result of the debt crisis in the euro area, economic confidence plummeted in May to 98.4 from 100.6, and German business confidence plunged in April.
On the other hand, unemployment in the euro zone inclined to 10.1% in April from 10.0%, the highest in 12 years, led by Spain with 20%. Despite the better-than estimated earnings announced in the first quarter, many companies are still lying off workers to cut costs.
The latest ECB anticipations are referring that the economy will grow 0.8% in 2010, ensuring that the economy will expand at a “moderate” pace and recovery will remain “uneven.”
Moving to the U.K., manufacturing climbed to 58.4 in May, to remain at the highest level in more than 15 years. Recent data has showed that the economy is showing progress; construction surged to 58.5 from 58.2, while today services is estimated to resume expansion to 55.7 in May from 55.3.
However, some analysts expect David Cameron's 6.2 billion pounds spending-cut plan will hurt household's income. Thus, the BoE is keeping interest rate low at 0.50% and leaving APF unchanged at 200 billion pounds to spur recovery.
In addition, the economy is benefiting from the pound's depreciation as it fell to low of 1.4229 in May against the dollar from the month's opening at 1.5334 which is expected to give a lift to exports.
OECD mentioned that the most difficult exam to global economies in the coming period is going to be cutting deficit without hurting growth especially as recovery is still fragile and needs further support from governments and central banks.
Source
Monday, June 28, 2010
Tuesday, June 15, 2010
UK construction sector expands further as mortgage approvals beat estimates
Today the attention is on the UK data which showed that the construction sector beat estimates which hinted the housing sector is improving further as mortgage approvals mark the highest in four months as the weather is heating up in Britain.
PMI construction, which represents nearly 6% of GDP in May climbed to 58.5 from 58.2, surpassing the projected 58.0. The construction sector resumed its expansion which hints that the housing sector is reviving.
It is not just the construction sector that has been showing enhancement, but the manufacturing sector yesterday we witnessed continue to expand while surpassing market expectations.
More news from today, mortgage approvals in April inclined to 49.9 thousand from the revised prior reading of 49.0 from 48.9 thousand which beat the estimated 49.5 thousand.
As the weather is improving and ending the harshest weather since 1979 alongside the transaction cost taxes on houses ending for first-time buyers, helped increase demand on houses, which at the end supported the housing sector.
Hometrack Ltd. which are property researchers, said that the new plan by Prime Minister David Cameron to cut spending by 6.2 billion pounds will hurt household's income and negatively affect housing activity.
For more news today, net consumer credit dor April fell 0.1 billion pounds from the revised previous 0.1 from 0.3 billion pounds while net lending secured on dwellings rose to 0.5 billion pounds from the revised prior of 0.2 from 0.3 billion pounds.
As the BoE continues to leave interest rates low at 0.50%, banks are holding back lending as a way to restructure their balance sheets after the worst financial crisis since the Great Depression had weighed on the strength of the nation heavily.
Officials are not worried about the housing sector as much as they are worried about the debt crisis in the nation, as they have the highest budget deficit since WWII, which is why officials are working around the clock to contain the debt before it threatens the economic recovery even further.
Source
PMI construction, which represents nearly 6% of GDP in May climbed to 58.5 from 58.2, surpassing the projected 58.0. The construction sector resumed its expansion which hints that the housing sector is reviving.
It is not just the construction sector that has been showing enhancement, but the manufacturing sector yesterday we witnessed continue to expand while surpassing market expectations.
More news from today, mortgage approvals in April inclined to 49.9 thousand from the revised prior reading of 49.0 from 48.9 thousand which beat the estimated 49.5 thousand.
As the weather is improving and ending the harshest weather since 1979 alongside the transaction cost taxes on houses ending for first-time buyers, helped increase demand on houses, which at the end supported the housing sector.
Hometrack Ltd. which are property researchers, said that the new plan by Prime Minister David Cameron to cut spending by 6.2 billion pounds will hurt household's income and negatively affect housing activity.
For more news today, net consumer credit dor April fell 0.1 billion pounds from the revised previous 0.1 from 0.3 billion pounds while net lending secured on dwellings rose to 0.5 billion pounds from the revised prior of 0.2 from 0.3 billion pounds.
As the BoE continues to leave interest rates low at 0.50%, banks are holding back lending as a way to restructure their balance sheets after the worst financial crisis since the Great Depression had weighed on the strength of the nation heavily.
Officials are not worried about the housing sector as much as they are worried about the debt crisis in the nation, as they have the highest budget deficit since WWII, which is why officials are working around the clock to contain the debt before it threatens the economic recovery even further.
Source
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